Jul. 30, 2012 - 06:11PM
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Alan Chvotkin is executive vice president and counsel at the Professional Services Council. (Tom Brown / Staff)

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Federal contractors should refrain from warning their employees about potential layoffs due to the possibility of severe automatic budget cuts — known as sequestration — taking effect Jan. 2, the Labor Department said Monday.

“Although it is currently known that sequestration may occur, it is also known that efforts are being made to avoid sequestration,” Labor Department Assistant Secretary Jane Oates said in a letter to state government officials.

The 1988 Worker Adjustment and Retraining Notification Act (WARN) requires contractors to give employees 60 days’ notice before mass layoffs or facility closings. Sequestration is expected to result in the loss of 2 million jobs in the defense and non-defense sectors, according to a report by the Center for Regional Analysis at George Mason University. Because the automatic cuts, if they occur, would begin taking effect Jan. 2, some contractors have said they may issue layoff notices as early as Nov. 2, four days before Election Day, in order to comply with the WARN Act.

However, since agencies have not identified what programs will be cut under sequestration or how deeply, companies do not know what plants will be closed or how many people will have to be laid off, Oates said in her letter to the states.

“To give notice to workers who will not suffer an employment loss both wastes the states’ resources in providing rapid response activities where none are needed and creates unnecessary uncertainty and anxiety in workers,” Oates said.

Instead, plant closings or mass layoffs before or in the wake of sequestration would be considered an “unforeseeable business circumstance,” one of the exceptions to the 60-day advance notice requirement, the memo said.

The guidance will come as welcome relief to contractors, said Alan Chvotkin, executive vice president of the Professional Services Council trade association.

“We welcome having clarity about the application of the federal WARN Act to sequestration,” he said. “It’s a level of specificity and clarity around a high-risk area facing government contractors.”

However, House Armed Services Committee Chairman Buck McKeon said in a statement that the guidance was politically motivated. People will still be laid off but have less notice to protect themselves, he said.

“Instead of working to bring his party in the Senate to the negotiating table to resolve sequestration, the President is focused on preventing advance notice to American workers that their jobs are at risk and on perpetuating uncertainty,” McKeon said. “As it stands, the only certainty we are dealing with is that dramatic cuts will force huge job losses.”